Bgn Digests
Business Law – Business Organization 1
LAW ON AGENCY
 ART. 1868, NCC. (Agency, defined)
By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of
another, with the consent or authority of the latter. (1709a)
 ART. 1869, NCC. (Agency, express or implied)
Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on
his behalf without authority.
Agency may be oral, unless the law requires a specific form.
(1710a)
 ART. 1874, NCC. (Agent’s authority in writing)
When a sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise,
the sale shall be void. (n)
 ART. 1878, NCC. (SPA, when required)
Special powers of attorney are necessary in the following
cases:
(1) To make such payments as are not usually considered as
acts of administration;
(2) To effect novations which put an end to obligations
already in existence at the time the agency was
constituted;
(3) To compromise, to submit questions to arbitration, to
renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
(6) To make gifts, except customary ones for charity or those
made to employees in the business managed by the
agent;
(7) To loan or borrow money, unless the latter act be urgent
and indispensable for the preservation of the things which
are under administration;
(8) To lease any real property to another person for more than
one year;
(9) To bind the principal to render some service without
compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the
agency;
(15) Any other act of strict dominion. (n)
Law on Agency
 ART. 1884, NCC. (Principal bound by agent)
The agent is bound by his acceptance to carry out the agency,
and is liable for the damages which, through his non-
performance, the principal may suffer.
He must also finish the business already begun on the death of
the principal, should delay entail any danger. (1718)
 ART. 1897, NCC. (Agent’s personal liability)
The agent who acts as such is not personally liable to the party
with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party
sufficient notice of his powers. (1725)
 ART. 1898, NCC. (Agent contracts without authority)
If the agent contracts in the name of the principal, exceeding the
scope of his authority, and the principal does not ratify the
contract, it shall be void if the party with whom the agent
contracted is aware of the limits of the powers granted by the
principal. In this case, however, the agent is liable if he
undertook to secure the principal's ratification. (n)
 ART. 1900, NCC. (Third person in estoppel)
A third person cannot set up the fact that the agent has
exceeded his powers, if the principal has ratified, or has signified
his willingness to ratify the agent's acts. (n)
 ART. 1909, NCC. (Agent’s liability for fraud/negligence)
The agent is responsible not only for fraud, but also for
negligence, which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a
compensation. (1726)
 ART. 1919, NCC. (Extinguishment of agency, grounds)
Agency is extinguished:
(1) By its revocation;
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or insolvency of the
principal or of the agent;
(4) By the dissolution of the firm or corporation which
entrusted or accepted the agency;
(5) By the accomplishment of the object or purpose of the
agency;
(6) By the expiration of the period for which the agency was
constituted. (1732a)
1

Contents
A1868 – CHEMPHIL EXPORT & IMPORT CORP VS CA
(1995) .............................................................................. 4
R/T ART. 1868 – AGENT – The buyer merely acted as an agent where it paid a
portion of the purchase price to the seller’s creditor. Since the buyer was only
paying using the seller’s own funds, the buyer is not considered a third party payor
as to effectuate legal subrogation from the seller of the rights to the attachment lien
of the disputed shares. ............................................................. 4
A1868 – FILIPINAS LIFE ASSURANCE VS PEDROSO
(2008) .............................................................................. 5
R/T ART. 1868 – AGENT – Valle acted as agent of the insurance company when he
collected amounts from the client and remitted the same to the company, using its
official receipts. LIABILITY OF PRINCIPAL – GR: LIABLE WITHIN SCOPE OF
AUTHORITY: The principal is liable for the acts of its agent done within the scope of
its authority. – EX: NOT LIABLE OUTSIDE SCOPE OF AUTHORITY: The principal
is not liable for the acts of its agent done in excess of its authority – EX TO EX:
LIABLE IF RATIFIED, EVEN IF OUTSIDE SCOPE OF AUTHORITY : The principal
is still liable for the acts of its agent, although done in excess of its authority, when
the principal ratifies them. – In this case, Valle’s representation is outside of the scope
of its authority, when he collected investments, despite the fact that the company only
offers insurance services. However, the company, as principal, is still liable, because
it ratified Valle’s authority upon confirmation thereof by its supervisor and branch
manager. Hence, the company is estopped to deny Valle’s authority. .............. 5
A1868 – EUROTECH INDUSTRIAL TECHOLOGIES VS
CUIZON (2007) ............................................................... 6
R/T ART. 1868 – AGENCY – PRINCIPLE: To accomplish results by using the
services of others – PURPOSE: To extend the personality of the principal or the party
for whom another acts and from whom he or she derives the authority to act – BASIS:
Representation, i.e. the agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal effect as if they were
personally executed by the principal – ELEMENTS: (1) CONSENT, express or
implied, of the parties to establish the relationship; (2) OBJECT is the execution of a
juridical act in relation to a third person; (3) AGENT ACTS AS A REPRESENTATIVE,
and not for himself; (4) AGENT ACTS WITHIN THE SCOPE OF HIS AUTHORITY.
..................................................................................... 6
AGENT – SALES MANAGER – The powers of an agent are particularly broad in the
case of one acting as a general agent or manager; such a position presupposes a
degree of confidence reposed and investiture with liberal powers for the exercise of
judgment and discretion in transactions and concerns which are incidental or
appurtenant to the business entrusted to his care and management. In the absence
of an agreement to the contrary, a managing agent may enter into any contracts that
he deems reasonably necessary or requisite for the protection of the interest of his
principal entrusted to his management. ............................................ 6
R/T ART. 1897 – AGENT, PERSONAL LIABILITY – RULES – GR: PRINCIPAL IS
SOLELY LIABLE FOR ACTS OF AGENT WITHIN BOUNDS OFHIS AUTHORITY –
EX: AGENT IS PERSONALLY LIABLE: (a) when he expressly binds himself, or
(b) he exceeds the limits of his authority without giving notice of his powers to
the third person. – THIRD PERSON CANNOT RECOVER FROM BOTH
PRINCIPAL & AGENT.
............................................................ 6
A1868 – BANATE VS PHIL COUNTRYSIDE RURAL
BANK (2010)................................................................... 8
Bgn Digests
Business Law – Business Organization 1
Law on Agency
R/T ART. 1868 – AGENT – AUTHORITY OF CORPORATE OFFICER IN DEALING
WITH THIRD PERSONS: (1) ACTUAL AUTHORITY – (a) Express authority,
measured by the power delegated to him by the corporation; (b) Implied authority,
measured by his prior acts which have been ratified or approved, or their benefits
accepted by his principal; (2) APPARENT AUTHORITY, which may be ascertained
through: (a) the corporation’s holding out of its officer or agent; and (b) its
acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, within or beyond the scope of his ordinary powers. ............ 8
DOCTRINE OF APPARENT AUTHORITY – the acts and contracts of the agent, as
are within the apparent scope of the authority conferred on him, although no actual
authority to do so has been conferred, bind the principal. It is determined only by the
acts of the principal (in ratifying or acquiescing thereto), and not by the acts of the
agent. .............................................................................. 8
AGENT – BRANCH MANAGER – Although a branch manager is the general agent
of the corporation, the power to modify or nullify corporate contracts remains
generally in the board of directors, and his acts shall not bind the corporation
especially where there is a vigorous denial of his acts by his principal. ............ 8
A1869 – YUN KWA BYUNG VS PAGCOR (2009) ...... 10
R/T ART. 1869 – IMPLIED AGENCY – It is derived from: (a) the acts of the principal;
(b) his silence or lack of action; or (c) his failure to repudiate the agency, knowing that
another person is acting on his behalf without authority. – AS ACTUAL AGENCY, it
must be proved by deductions or inferences from other facts. – NO IMPLIED
AGENCY – where the alleged principal posted notices to warn the gaming public that
no such agency exists. ........................................................... 10
VIS-A-VIS APPARENT AUTHORITY – It is based on estoppel which can arise from
two circumstances (see table in digest) - NO RATIFICATION BY THE PRINCIPAL –
because the junket agreement is void for being violative of the PAGCOR’s charter
................................................................................... 10
A1874 – ESTATE OF LINO OLAGUER VS ONGJOCO
(2008) ............................................................................ 12
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES –
Where no power of authority to sell real property was presented in writing, it is as if
no such authority was given, and the sale is void. Where there is a mere general
power of authority presented, and not a SPA, it is deemed sufficient if the special
authority to sell real property was already incorporated in the general power of
authority. ......................................................................... 12
A1874 – MACTAN CEBU INTERNATIONAL AIRPORT
AUTHORITY VS UNCHUAN (2016) ............................ 13
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES –
CORRELATE: ART. 1878 – SPA REQUIRED TO TRANSFER OWNERSHIP OF
IMMOVABLES – Without SPA, the alleged agent could not be legally considered a
representative. And his act of conveying cannot be a valid source of obligation to bind
all the other registered co-owners and their heirs. The other heirs could not have
given their consent, because there was no meeting of the minds among the other
registered co-owners who gave no written authority to Atanacio to transact on their
behalf. – EFFECT OF NO SPA TO THE SALE - VOID, insofar as the other
supposed represented co-owners are concerned – VALID, insofar as the co-
owner who acted as agent is concerned since he has the right to dispose of his
undivided share to others. ....................................................... 13
A1878 – WOODCHILD HOLDINGS VS ROXAS
ELECTRIC (2004)......................................................... 14
2
 Bgn Digests
Business Law – Business Organization 1
Law on Agency

R/T ART. 1878 – SPA ON REAL RIGHTS OVER IMMOVABLE – e.g. conveyance
of road right-of-way – REQUIRES PUBLIC INSTRUMENT....................... 14
DOCTRINE OF APPARENT AUTHORITY, BURDEN TO PROVING: (a) the acts of
the respondent justifying belief in the agency by the petitioner; (b) knowledge thereof
by the respondent which is sought to be held; and (c) reliance thereon by the
petitioner consistent with ordinary care and prudence. – RATIFICATION MUST BE
IN WRITING, if writing is required to grant an authority to do a particular act. IF NOT
RATIFIED, UNENFORCEABLE.
................................................. 14
A1878 – SHOPPER’S PARADISE REALTY VS ROQUE
(2004) ............................................................................ 16
R/T ART. 1878 – SPA IN LEASE OF REAL PROPERTY FOR MORE THAN 1 YEAR
– Where the supposed agent enters into a 25-year lease contract with a third person,
the agent is not merely performing an act of administration, but an act of strict
dominion or ownership. Hence, SPA is necessary. ............................... 16
R/T ART. 1878 – SPA IN MORTGAGE – PROPERTY IN MORTGAGE DIFFERENT
FROM PROPERTY IN SPA, UNENFORCEABLE MORTGAGE – The SPA contains
the exclusive enumeration of the properties with which the agent is authorized to
mortgage. Where the property in the SPA and the property so mortgaged by the agent
are different, e.g. in TCT numbers and the ROD where these were registered, the
REM is unenforceable unless ratified by the principal. - SUBSEQUENT
REVOCATION – ACTUAL NOTICE SUPERIOR THAN CONSTRUCTIVE NOTICE
– Where the ROD was informed of the principal’s intent to revoke the SPA and to
require her prior consent before any mortgage or sale may be had, this serves as an
actual notice. The fact that it was not annotated at the back of the title is of no moment,
since actual notice is superior than constructive notice. Moreover, in the case, there
was even a subsequent constructive notice when the revocation was recorded in the
ROD. – MORTGAGEE BANK NOT IN GOOD FAITH FOR FAILURE TO EXERCISE
EXTRAORDINARY DILIGENCE IN DETERMINING AGENT’S LACK OF
AUTHORITY.
.................................................................... 23

A1878 – DOMINION INSURANCE VS CA (2002) ....... 17 A1878 – MACTAN-CEBU INTERNATIONAL AIRPORT

AUTHORITY VS UNCHUAN (SEEABOVETEXT) ....... 26
R/T ART. 1878 – SPA IN SETTLEMENT OF INSURANCE CLAIMS – The payment
or settlement of insurance claims on behalf of the insurer (principal) is not an act of A1884 – BA FINANCE VS CA (1991).......................... 27
administration, but rather of strict dominion, which requires an SPA. ............. 17 R/T ART. 1884 – PRINCPAL’ S LIABILITY – BA Finance is bound by its acceptance
to carry put the agency, and is liable for damages which, thorugh its non-performance,
R/T ART. 1918 – AGENT’S LIABILITY – UNDER LAW ON AGENCY,
PERSONALLY LIABLE FOR ACTS BEYOND THE SCOPE OF AUTHORITY - BUT the Cuadys (the principal) may suffer. ........................................... 27
UNDER THE GENERAL LAW ON OBLICON, MAY BE REIMBURSED TO THE
A1897 – RUSTAN PULP & PAPER MILLS VS IAC .... 28
EXTENT THAT THE DEBTOR (INSURER) WAS BENEFITED TO PREVENT
UNJUST ENRICHMENT. A1897 – SCHMID & OBERLY INC VS RJL MARTINEZ
........................................................ 17
FISHING CORP ............................................................ 28
A1878 – ADRIANO VS PANGILINAN (2002) .............. 18
A1897 – EUROTECH INDUSTRIAL TECHNOLOGIES
R/T ART. 1878 – SPA IN MORTGAGE LOAN – Petitioner’s act of entrusting his TCT
VS CUIZON (SEEABOVETEXT).................................. 28
to his distant relative was for the purpose of helping him find a money lender. Not
having executed a SPA in her favor, the petitioner clearly did not authorize her to be A1897 – DBP VS CA .................................................... 28
his agent in procuring the mortgage. ............................................. 18 A1898 – SAFIC ALCAN & CIE VS IMPERIAL
A1878 – PP VS CARPO (2001).................................... 19 VEGETABLE OIL ......................................................... 28
R/T ART. 1878 – SPA IN COMPROMISE OF CIVIL LIABILITY IN CRIMINAL CASE A1898 – CERVANTES VS CA ..................................... 28
– An oral compromise to limit civil liability entered into by the defense counsel with
A1900 – SIREDY ENTERPRISES VS CA ................... 28
the public prosecutor is invalid. SPA is necessary. In the absence of SPA, the counsel
can neither bind nor compromise his client’s civil liability. ........................ 19
A1909 – TRAVEL WIDE ASSOCIATED SALES VS CA
...................................................................................... 28
A1878 – ANACLETO VS VAN TWEST (2000) ............ 20
A1909 – MBTC VS CA ................................................. 28
R/T ART. 1878 – SPA IN COMPROMISE, MANDATORY – COMPROMISE
AGREEMENT IS INVALID IF COUNSEL SIGNED, IN REPRESENTATION OF HIS A1919 – BUADO VS LAYAG ....................................... 28
CLIENT, WITHOUT SPA TO COMPROMISE – IF CLIENT IS A CORPORATION, A1919 – ESTATE OF JULIANA DIEZ VDA DE GABRIEL
SPA MUST BE GIVEN BY THE BOARD OF DIRECTORS.
..................... 20 VS CIR .......................................................................... 28
A1878 – LOYOLA SECURITY AND DETECTIVE
AGENCY VS NLRC (1995) ........................................... 22
R/T ART. 1878 – SPA IN NOVATIONS, COMPROMISE, WAIVER OF Notes:
OBLIGATIONS, ANY ACT OF STRICT DOMINION – Where there is no showing that
respondent was duly authorized by co-respondent to waive a part of the award given
to the latter, a compromise agreement entered into by the respondent in his own
behalf and in behalf of his co-respondent shall be void. .......................... 22

A1878 – MERCADO VS ALLIED BANKING CORP

(2007) ............................................................................ 23

3

A1868 – CHEMPHIL EXPORT & IMPORT CORP VS CA (1995)
R/T ART. 1868 – AGENT – The buyer merely acted as an agent where it
paid a portion of the purchase price to the seller’s creditor. Since the
buyer was only paying using the seller’s own funds, the buyer is not
considered a third party payor as to effectuate legal subrogation from
the seller of the rights to the attachment lien of the disputed shares.
++PRINCIPAL: Antonio Garcia – as original owner & seller of the disputed shares
++AGENT: FIC – as buyer of the disputed shares, obliged to pay the part of the purchase price
to seller Garcia’s creditor, SBTC
FACTS:
This involves the disputed 1,717,678 shares of stock of Antonio
Garcia in Chemphil. The controversy arose from 2 complaints
for declaratory relief and/or injunction filed by Dynetics &
Antonio Garcia:
a. 1ST: The consortium case (filed against PISO, BPI,
LBP, PCIB, & RCBC -- respondents) on Sep 25 1984;
b. 2ND: The SBTC case, on Apr 23 1985.
In both cases, the Court dismissed Garcia’s complaint, and
instead issued writs of attachment in favor of the defendants:
a. 1ST: in the SBTC case on Jul 2 1985
b. 2ND: in the consortium case on Jul 19 1985
wherein the garnishment of Garcia’s properties included the
disputed shares in Chemphil.
During the appeal of the consortium case, a compromise
agreement was entered into by the Garcia and the consortium.
One of the conditions provided was that Garcia shall be given 2
months to work for the entry and participation of his other
creditor, SBTC, into his compromise.
Problem is, on Jul 15 1988, Garcia executed a Deed of Sale
transferring the disputed shares to FCI. It was agreed that FCI,
as vendee, shall pay part of the purchase price directly to
SBTC for judgment credits against Garcia in the SBTC case.
Because of this, FCI issued a check to pay SBTC. However,
SBTC refused to accept the check claiming that it was not
sufficient to discharge the debt. Later however, on Jun 26 1989,
FCI assigned the disputed shares to CEIC (petitioner).
Meanwhile, on Jul 18 1989, the consortium filed a motion for
execution, invoking that Garcia failed to comply with the terms
of the compromise agreement. Eventually, the disputed shares
of Garcia were levied upon on execution. And finally, the
consortium acquired the disputed shares of stock at the public
auction sale.
However, on Sep 26 1989, CEIC filed a motion to intervene in
the consortium case; claiming that it is now the rightful owner
of the disputed shares after it was assigned to it on Jun 26
1989 by CEIC, who purchased the same from FCI, who likewise
purchased the same from Garcia. TC granted CEIC’s motion.
This was opposed by the consortium, alleging that their
attachment lien over the disputed shares must prevail over
the private sale in favor of CEIC, considering that these were
garnished as early as Jul 19 1985.
Bgn Digests
Business Law – Business Organization 1
Law on Agency
RTC favored CEIC. CA REVERSED in favor of the consortium.
Hence, the petition.
CEIC’S CONTENTION:
Based on ART. 1302(2), NCC, that there was legal subrogation
when a third person, not interested in the obligation, pay with the
express or tacit approval of the debtor. This is when FCI (CEIC’s
predecessor-in-interest) paid SBTC the due obligations of
Garcia; thus, FCI, and later CEIC, was subrogated to the rights
of SBTC, particularly to the latter’s attachment lien.
ISSUE:
a. Ultimately, who is the rightful owner of the disputed
shares? (THE CONSORTIUM)
b. For purposes of discussion: WON FCI is a third party
payor under ART. 1302 or a mere agent under ART.
1868, NCC. (AGENT)
HELD: The Respondents Consortium has the better right over
the disputed shares. FCI is a mere agent under ART. 1868.
Petitioner invoked ART. 1302 (2), which provides that there is a
presumed legal subrogation when a third person, not interested
in the obligation, pays with the express or tacit approval of the
debtor. (LACKS MERIT)
ART. 1302(2) is not applicable. When Garcia sold the disputed
shares to FCI (CEIC’s predecessor-in-interest), the latter did
not by its own paid Garcia’s obligation to SBTC. Thus, FCI
is not a third party payor.
Rather, FCI only paid SBTC with Garcia’s money, as it was
supposed to be the portion of the purchase price to be given to
Garcia who directed FCI to pay the same to his creditor SBTC.
In effect, it was still Garcia’s own money which paid his own
debt. FCI merely acted as an agent under ART. 1868. FCI was
merely fulfilling its obligation under the Deed of Sale. FCI
merely bound himself under a contract of agency, where he is
to render some service or to do something in representation or
on behalf of another, with the consent or authority of the latter.
Thus, CEIC is not subrogated to the rights of SBTC against
Garcia, since the requisites for legal subrogation under ART.
1302(2) was not complied with. So, CEIC never acquired
SBTC’s attachment lien thereof. CEIC cannot be categorized as
an attaching creditor.
Moreover, CEIC’s claim is only based on the Deed of Sale,
which is still subject to an attachment legally and validly levied
thereon (i.e. the attachment by the consortium).
Therefore, CEIC’s claim of purchase cannot prevail over that of
the Consortium. It is the consortium which has better right over
the disputed shares.
WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby
AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the
rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting
to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same
or similar acts in the future shall be dealt with more severely.
4

A1868 – FILIPINAS LIFE ASSURANCE VS PEDROSO (2008)
R/T ART. 1868 – AGENT – Valle acted as agent of the insurance company
when he collected amounts from the client and remitted the same to
the company, using its official receipts. LIABILITY OF PRINCIPAL – GR:
LIABLE WITHIN SCOPE OF AUTHORITY: The principal is liable for the acts
of its agent done within the scope of its authority. – EX: NOT LIABLE
OUTSIDE SCOPE OF AUTHORITY: The principal is not liable for the acts of
its agent done in excess of its authority – EX TO EX: LIABLE IF RATIFIED,
EVEN IF OUTSIDE SCOPE OF AUTHORITY : The principal is still liable for
the acts of its agent, although done in excess of its authority, when the
principal ratifies them. – In this case, Valle’s representation is outside
of the scope of its authority, when he collected investments, despite the
fact that the company only offers insurance services. However, the
company, as principal, is still liable, because it ratified Valle’s authority
upon confirmation thereof by its supervisor and branch manager.
Hence, the company is estopped to deny Valle’s authority.
+PRINCIPAL: Filipinas Life, as insurance company
+AGENT: Valle, as insurance agent, who received the investments of Respondents
Pedroso & Palacio, and who refused to return the later amounts to said respondents.
FACTS:
This involves policyholder Teresita Pedroso (respondent) of Filipinas
Life (petitioner insurance company). Ever since, she had been
transacting with her insurance agent Renato Valle.
One day, Valle told her of the company’s promotional investment
program, offering 8% prepaid interest a month. Enticed, Pedroso
invested and issued a post-dated check. In return, Valle issued his
personal check for the 8% prepaid interest and a Filipinas Life “Agent’s
Receipt”.
Later, Pedroso called the Filipinas Life Escolta office and talked to
administrative assistant Francisco Alcantara, and then to branch
manager Angel Apetrior. Both employees confirmed the promotion.
Thus, relying on Valle, Alcantara, and Apetror, Pedroso invested P10K,
and this was later returned to her. So, she investment a couple more
times. She even told Jennifer Palacio (another respondent) of this
investment plan, which influenced the latter to invest too.
Problem is, when both Pedroso and Palacio tried to withdraw their
investment, Valle refused to return some P17K, and the Filipinas
likewise refused to return their money. After several demands being left
unheeded and not having seen Valle, respondents Pedroso and Palacio
filed an action for recovery of sum of money.
RTC held Filipinas Life and its co-defendants Valle, Apetrior, and
Alcantara jointly and solidarily liable CA AFFIRMED. Hence, the petition.
PETITIONER FILIPINAS LIFE’S CONTENTION:
Although it recognized Valle as its agent, it claimed that Valle and
Apetrior and Alcantara were acting outside the scope of their authority
as agents.
RESPONDENTS PEDROSO & PALACIO CONTENDS:
That Filipinas Life authorized Valle, considering that Filipinas Life’s
official documents and facilities were used.
Bgn Digests
Business Law – Business Organization 1
Law on Agency
ISSUE:
a. WON Valle, Alcantara, and Apetrior are agents of Filipinas
Life. (YES, AGENTS)
b. If so, WON Filipinas Life, as principal, be held solidarily liable
with its agents. (YES, SOLIDARILY LIABLE)
HELD: The three of them are agents of Filipinas Life, with whom it is
solidarily liable with against petitioners.
A. THEY ARE AGENTS OF FILIPINAS LIFE.
The ff. are the indicators that Valle, Alcantara, and Apetrior are agents
of Filipinas Life:
a. Respondents’ invested amounts were received by Valle and
remitted to Filipinas Life, using Filipinas Life’s official receipts,
whose authenticity were not disputed.
b. Valle’s authority to solicit and receive investments was also
established by the parties.
c. When respondents sought confirmation, Alcantara, holding a
supervisory position, and Apetrior, the branch manager,
confirmed that Valle had authority.
B. FILIPINAS LIFE IS SOLIDARILY LIABLE.
Filipinas Life, as the principal, is liable for obligations contracted by
its agent Valle. By the contract of agency, a person binds himself to
render some service or to do something in representation or on behalf
of another, with the consent or authority of the latter.
RULES ON PRINCIPAL’S LIABILITY WITH AGENT:
a. The general rule is that the principal is responsible for the
acts of its agent done within the scope of its authority,
and should bear the damage caused to third persons.
b. When the agent exceeds his authority, the agent becomes
personally liable for the damage.
c. But even when the agent exceeds his authority, the principal
is still solidarily liable together with the agent if the
principal allowed the agent to act as though the agent had
full powers.[15] In other words, the acts of an agent beyond
the scope of his authority do not bind the principal, unless the
principal ratifies them, expressly or impliedly.[16]
Ratification in agency is the adoption or confirmation by one
person of an act performed on his behalf by another without
authority.[17]
Filipinas Life cannot profess ignorance of Valle’s acts. Even if
Valle’s representations were beyond his authority as a
debit/insurance agent, (since investment is not part of the
insurance policy extended by the company) Filipinas Life thru
Alcantara and Apetrior expressly and knowingly ratified
Valle’s acts. It cannot even be denied that Filipinas Life benefited
from the investments deposited by Valle in the account of Filipinas
Life. In our considered view, Filipinas Life had clothed Valle with
apparent authority; hence, it is now estopped to deny said
authority. Innocent third persons should not be prejudiced if the
principal failed to adopt the needed measures to prevent
misrepresentation, much more so if the principal ratified his agent’s
acts beyond the latter’s authority. The act of the agent is
considered that of the principal itself. Qui per alium facit per
seipsum facere videtur. “He who does a thing by an agent is
considered as doing it himself.”[18]
WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated November 29,
2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.
Costs against the petitioner.
5

A1868 – EUROTECH INDUSTRIAL TECHOLOGIES VS CUIZON (2007)
R/T ART. 1868 – AGENCY – PRINCIPLE: To accomplish results by using
the services of others – PURPOSE: To extend the personality of the
principal or the party for whom another acts and from whom he or she
derives the authority to act – BASIS: Representation, i.e. the agent acts
for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were
personally executed by the principal – ELEMENTS: (1) CONSENT, express
or implied, of the parties to establish the relationship; (2) OBJECT is the
execution of a juridical act in relation to a third person; (3) AGENT ACTS
AS A REPRESENTATIVE, and not for himself; (4) AGENT ACTS WITHIN THE
SCOPE OF HIS AUTHORITY.
AGENT – SALES MANAGER – The powers of an agent are particularly
broad in the case of one acting as a general agent or manager; such a
position presupposes a degree of confidence reposed and investiture
with liberal powers for the exercise of judgment and discretion in
transactions and concerns which are incidental or appurtenant to the
business entrusted to his care and management. In the absence of an
agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or requisite for the
protection of the interest of his principal entrusted to his management.
R/T ART. 1897 – AGENT, PERSONAL LIABILITY – RULES – GR: PRINCIPAL
IS SOLELY LIABLE FOR ACTS OF AGENT WITHIN BOUNDS OFHIS
AUTHORITY – EX: AGENT IS PERSONALLY LIABLE: (a) when he expressly
binds himself, or (b) he exceeds the limits of his authority without giving
notice of his powers to the third person. – THIRD PERSON CANNOT
RECOVER FROM BOTH PRINCIPAL & AGENT.
++PRINCIPAL: ERWIN, the owner of Impact Systems, who collected the receivables
from Toledo Power Corp which was supposedly assigned to assignee Eurotech.
++AGENT: EDWIN, the sales manager of Impact Systems (brother of Erwin), who
executed the Deed of Assignment, in behalf of Impact Systems, in favor of Eurotech
FACTS:
This involves the Deed of Assignment executed by
EDWIN Cuizon as sales manager as agent of its principal
Impact Systems owned by his brother ERWIN Cuizon
(respondent brothers).
This started when Eurotech (petitioner-company) sold to
Impact Systems, among others, a one unit of sludge
pump valued at P250,000. When the sludge pump arrived
from UK, Eurotech refused to deliver it to respondents
pending full payment of their debts to petitioner. So,
respondent EDWIN, in behalf of Impact Sales, executed
a “Deed of Assignment” of its receivables from Toledo
Power Corp. in favor of petitioner-company. As a result,
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petitioner Eurotech delivered the sludge pump to
respondents.
Problem is, unbeknown to petitioner-company and
despite the Deed of Assignment, respondent ERWIN still
collected from Toledo Power Company its receivables
worth P365,135.29. This prompted petitioner-company to
demand payment from respondents. But having failed to
fully comply with this obligation, petitioner filed a
Complaint for Sum of Money, damages, etc. against
the respondent-brothers.
However, Respondent EDWIN alleged that he is not a real
party in interest, since he was allegedly acting as mere
agent of the principal, who was Impact Systems. By this,
TC rendered Order dropping EDWIN as party-defendant.
CA AFFIRMED. Hence, the petition.
PETITIONER EUROTECH’S CONTENTION:
That ERWIN’s act of collecting the receivables from
Toledo Power Corp., notwithstanding the existence of the
Deed of Assignment signed by EDWIN on behalf of
Impact system, repudiated EDWIN’s power to sign the
Deed of Assignment. As EDWIN did not sufficiently notify
ERWIN of the extent of his power as agent, as required
by law, EDWIN should be made personally liable for the
obligations of its principal.
RESPONDENT EDWIN’S CONTENTION:
That he is not a party in interest, because he was a mere
agent of Impact Systems owned by ERWIN.
ISSUE:
a. WON EDWIN was such an agent. (YES,
AGENT.)
b. If so, WON EDWIN, as agent, be personally liable
along with ERWIN, as principal. (NO, AGENT
NOT LIABLE.)
HELD:
A. EDWIN IS AN AGENT.
In a contract of agency, a person binds himself to render
some service or to do something in representation or on
behalf of another with the latter's consent.[29] The
underlying principle of the contract of agency is to
accomplish results by using the services of others —
to do a great variety of things like selling, buying,
manufacturing, and transporting.[30] Its purpose is to
extend the personality of the principal or the party for
whom another acts and from whom he or she derives
the authority to act.[31] It is said that the basis of agency
is representation, that is, the agent acts for and on behalf
of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were
6

personally executed by the principal.[32] By this legal
fiction, the actual or real absence of the principal is
converted into his legal or juridical presence — qui facit
per alium facit per se.
The elements of the contract of agency are: (1) consent,
express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts
within the scope of his authority.
In this case, the parties do not dispute the existence of
the agency relationship between respondents ERWIN as
principal and EDWIN as agent. The only cause of the
present dispute is whether respondent EDWIN
exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to
pay the obligations to petitioner.
B. EDWIN, AS AGENT, IS NOT PERSONALLY
LIABLE WITH HIS PRINCIPAL.
Article 1897 reinforces the familiar doctrine that an agent,
who acts as such, is not personally liable to the party
with whom he contracts. The same provision, however,
presents two instances when an agent becomes
personally liable to a third person. The first is when
he expressly binds himself to the obligation and the
second is when he exceeds his authority. In the last
instance, the agent can be held liable if he does not
give the third party sufficient notice of his powers.
We hold that respondent EDWIN does not fall within any
of the exceptions. The Deed of Assignment clearly states
that respondent EDWIN signed thereon as the sales
manager of Impact Systems. The position of manager
is unique in that it presupposes the grant of broad
powers with which to conduct the business of the
principal.
Edwin Cuizon acted well-within his authority when he
signed the Deed of Assignment. To recall, petitioner
refused to deliver the one unit of sludge pump unless
it received, in full, the payment for Impact Systems'
indebtedness.[36] We may very well assume that
Impact Systems desperately needed the sludge pump
for its business since after it paid the amount of fifty
thousand pesos (P50,000.00) as down payment on 3
March 1995,[37] it still persisted in negotiating with
petitioner which culminated in the execution of the
Deed of Assignment of its receivables from Toledo
Power Company on 28 June 1995.[38] The significant
amount of time spent on the negotiation for the sale of the
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sludge pump underscores Impact Systems' perseverance
to get hold of the said equipment. There is, therefore, no
doubt in our mind that respondent EDWIN's
participation in the Deed of Assignment was
"reasonably necessary" or was required in order for him
to protect the business of his principal. Had he not
acted in the way he did, the business of his principal would
have been adversely affected and he would have violated
his fiduciary relation with his principal.
Also, petitioner cannot seek to recover both from
respondents ERWIN, as principal, and EDWIN, as agent.
It is well to state here that Article 1897 of the New Civil
Code upon which petitioner anchors its claim against
respondent EDWIN "does not hold that in case of excess
of authority, both the agent and the principal are liable to
the other contracting party."[39] To reiterate, the first part
of Article 1897 declares that the principal is liable in
cases when the agent acted within the bounds of his
authority. Under this, the agent is completely absolved of
any liability. The second part of the said provision
presents the situations when the agent himself becomes
liable to a third party when he expressly binds himself
or he exceeds the limits of his authority without
giving notice of his powers to the third person.
However, it must be pointed out that in case of excess of
authority by the agent, like what petitioner claims exists
here, the law does not say that a third person can
recover from both the principal and the agent.
Therefore, respondent EDWIN acted within his authority
as agent, and is not a RPII.
WHEREFORE, premises considered, the present petition is DENIED and the Decision
dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in
CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial
Court, Branch 8, Cebu City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu
City, for the continuation of the proceedings against respondent Erwin Cuizon.
7

A1868 – BANATE VS PHIL COUNTRYSIDE RURAL BANK (2010)
R/T ART. 1868 – AGENT – AUTHORITY OF CORPORATE OFFICER IN
DEALING WITH THIRD PERSONS: (1) ACTUAL AUTHORITY – (a) Express
authority, measured by the power delegated to him by the corporation;
(b) Implied authority, measured by his prior acts which have been
ratified or approved, or their benefits accepted by his principal; (2)
APPARENT AUTHORITY, which may be ascertained through: (a) the
corporation’s holding out of its officer or agent; and (b) its acquiescence
in his acts of a particular nature, with actual or constructive knowledge
thereof, within or beyond the scope of his ordinary powers.
DOCTRINE OF APPARENT AUTHORITY – the acts and contracts of the
agent, as are within the apparent scope of the authority conferred on
him, although no actual authority to do so has been conferred, bind the
principal. It is determined only by the acts of the principal (in ratifying
or acquiescing thereto), and not by the acts of the agent.
AGENT – BRANCH MANAGER – Although a branch manager is the
general agent of the corporation, the power to modify or nullify
corporate contracts remains generally in the board of directors, and his
acts shall not bind the corporation especially where there is a vigorous
denial of his acts by his principal.
++PRINCIPAL: PCRB, the bank, who insisted on the cross-collateral stipulation in the
mortgage contract
++AGENT: BM Mondigo, the branch manager who verbally agreed on the novation of
the mortgage contract.
FACTS:
This involves the alleged novation of the cross-collateral
stipulation in the mortgage contract.
Spouses Maglasang (petitioners) obtained a loan of P1,070,000
from PCRB (respondent bank), secured by a real estate
mortgage over the subject property, w/c includes the house
owned by Spouses Cortel (also petitioners). Aside from the
subject loan, two other loans were subsequently obtained by
Spouses Maglasang.
However, the mortgage contract contained a “cross-collateral
stipulation" which requires the full settlement of all three loans
before the release of any mortgage.
Later, Spouses Maglasang and Spouses Cortel asked PCRB’s
permission to sell the subject properties. Branch Manager
Pancrasio Mondigo, acting for PCRB, verbally agreed, but
required them the full payment of the first loan (the P1,070,000).
So, Spouses Maglasang and Spouses Cortel sold the subject
properties to Violeta Banata (also, petitioner) for P1,750,000,
and used said amount to pay their first loan with PCRB. As a
result, PCRB gave the owner’s duplicate certificate of title to
Banate.
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Problem is, the title still carried the mortgage lien in favor of
PCRB. This prompted petitioners to request PCRB for the
release of the mortgage, to which PCRB refused. Hence,
petitioners instituted an action for specific performance to
compel PCRB to release the mortgage.
RESPONDENT PCRB’S CONTENTION:
Based on the “cross-collateral stipulation”, full payment of the
three loans was necessary before the release of any mortgage.
RTC favored petitioners, finding the contract as a contract of
adhesion.
CA REVERSED, finding that BM Mondigo cannot orally
amend the mortgage contract between PCRB and petitioner
spouses. His acts, which constitute a novation of the original
mortgage containing the cross-collateral stiulation, cannot bind
PCRB.
PETITIONERS’ CONTENTION:
That the cross-collateral stipulation should be disregarded,
since it was novated by the subsequent agreement with BM
Mondigo, who acted as agent of its principal, PCRB. Thus,
PCRB is bound by the acts of its agent, Mondigo.
ISSUE: WON Branch Manager’s act of verbally agreeing to the
novation of the mortgage contract binds its principal, PCRB.
(NOT BINDING)
HELD: The Branch Manager’s act of verbally agreeing to the
novation of the mortgage contract does not bind PCRB. There
was neither such express nor apparent authority granted to him
by the PCRB.
The “cross-collateral stipulation” in the mortgage contract was a
variety of a dragnet clause, where the security covers not only
the first loan, but as well as the 2 loans subsequently obtained
by the petitioners. According to petitioners, this was deemed
novated by agreement with Branch Manager Mondigo. (LACKS
MERIT)
For novation to be valid (particularly an extinctive novation,
where an old obligation is terminated by the creation of a new
obligation that takes the place of the former; in contrast with a
modificatory novation, where the old obligations subsists), the ff.
requisites should be complied with:
(1) a previous valid obligation;
(2) an agreement of all parties concerned to a new
contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.
In this case, the 2nd requisite is lacking. For the consequent
creation of a new contractual obligation, consent of both parties,
is thus required. Where either or both parties involved are
juridical entities, proof that the second contract was
executed by persons with the proper authority to bind their
respective principals is necessary.
Under the Corporation Code, the power and the
responsibility to decide whether the corporation should
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enter into a contract that will bind the corporation are
lodged in the Board of Directors, who may delegate the
same to its officers, committees, or agents.
The authority of a corporate officer or agent in dealing with
third persons may be actual or apparent.
1. Actual authority is either express or implied.
a. The extent of an agent's express authority is to
be measured by the power delegated to him by
the corporation, while
b. The extent of his implied authority is measured
by his prior acts which have been ratified or
approved, or their benefits accepted by his
principal.
2. The doctrine of "apparent authority," on the other
hand, with special reference to banks, had long been
recognized in this jurisdiction. The existence of
apparent authority may be ascertained through:
(a) the general manner in which the corporation
holds out an officer or agent as having the
power to act, or in other words, the apparent
authority to act in general, with which it
clothes him; or
(b) the acquiescence in his acts of a particular
nature, with actual or constructive knowledge
thereof, within or beyond the scope of his
ordinary powers.
corporation, with apparent authority commensurate with the
ordinary business entrusted him and the usual course and
conduct thereof,[25] yet the power to modify or nullify
corporate contracts remains generally in the board of
directors.
Being a mere branch manager alone is insufficient to support
the conclusion that Mondigo has been clothed with "apparent
authority" to verbally alter terms of written contracts, especially
when viewed against the telling circumstances of this case:
a) the unequivocal provision in the mortgage
contract;
b) PCRB's vigorous denial that any agreement to
release the mortgage was ever entered into by it; and,
c) the fact that the purported agreement was not even
reduced into writing considering its legal effects on
the parties' interests.
It is a settled rule that persons dealing with an agent are
bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and
extent of the agent's authority, and in case either is controverted,
the burden of proof is upon them to establish it.
As a result, the purported agreement with BM Mondigo is not
binding on the bank for lack of authority of PCRB's branch
manager. The present action has no basis.

Under the doctrine of apparent authority, acts and contracts WHEREFORE, we DENY the petitioners' petition for review on certiorari for lack of merit, and
of the agent, as are within the apparent scope of the AFFIRM the decision of the Court of Appeals dated December 19, 2003 and its resolution dated
authority conferred on him, although no actual authority to May 5, 2004 in CA-G.R. CV No. 74332. No pronouncement as to costs.
do such acts or to make such contracts has been conferred,
bind the principal.[20] The principal's liability, however, is limited
only to third persons who have been led reasonably to believe
by the conduct of the principal that such actual authority exists,
although none was given. In other words, apparent authority is
determined only by the acts of the principal and not by the
acts of the agent.[21] There can be no apparent authority of an
agent without acts or conduct on the part of the principal; such
acts or conduct must have been known and relied upon in good
faith as a result of the exercise of reasonable prudence by a third
party as claimant, and such acts or conduct must have produced
a change of position to the third party's detriment.

The records and TC’s decision was utterly silent on the manner
by which PCRB, as supposed principal, has "clothed" or
"held out" its branch manager as having the power to enter
into an agreement, as claimed by petitioners:
a) No proof of the course of business, usages and
practices of the bank about, or knowledge that the
board had or is presumed to have of, its responsible
officers' acts regarding bank branch affairs, was
ever adduced to establish the branch manager's
apparent authority to verbally alter the terms of
mortgage contracts.
b) Neither was there any allegation, much less proof, that
PCRB ratified Mondigo's act or is estopped to
make a contrary claim.

Although a branch manager, within his field and as to third

persons, is the general agent and is in general charge of the
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A1869 – YUN KWA BYUNG VS PAGCOR (2009) exchange gambling, conducted by PAGCOR
R/T ART. 1869 – IMPLIED AGENCY – It is derived from: (a) the acts of the dealers using PAGCOR facilities, operated by
principal; (b) his silence or lack of action; or (c) his failure to repudiate PAGCOR employees and using PAGCOR chips
the agency, knowing that another person is acting on his behalf without bearing the PAGCOR logo;[54]
authority. – AS ACTUAL AGENCY, it must be proved by deductions or 3. PAGCOR controlled the release, withdrawal
inferences from other facts. – NO IMPLIED AGENCY – where the alleged and return of all the gambling chips given to
principal posted notices to warn the gaming public that no such agency ABS Corporation in that part of the casino and at
exists. the end of the day, PAGCOR conducted an
inventory of the gambling chips;[55]
VIS-A-VIS APPARENT AUTHORITY – It is based on estoppel which can
4. ABS Corporation accounted for all gambling
arise from two circumstances (see table in digest) - NO RATIFICATION BY
chips with the Commission on Audit (COA),
THE PRINCIPAL – because the junket agreement is void for being
the official auditor of PAGCOR;[56]
violative of the PAGCOR’s charter
5. PAGCOR enforced, through its own
++ALLEGED PRINCIPAL: PAGCOR
++ALLEGED AGENT: ABS CORP.
manager, all the rules and regulations on the
FACTS: operation of the gambling pit used by ABS
This involves Yun Kwa Byung (petitioner) who is a junket Corporation.[
player brought in by Korean-based ABS Corporation in
relation to the Junket Agreement which the latter entered ISSUE: WON an implied agency or agency by estoppel
into with PAGCOR (to allow foreign players to play at the existed as to hold PAGCOR liable as principal for the acts
5 designated gaming tables of the Casino Filipino at of its alleged agent ABS Corp. (NO AGENCY)
Grand Blvd. Hotel, Manila).
HELD: No agency existed, whether implied or by
Petitioner filed a complaint for sum of money against estoppel. Hence, PAGCOR is not liable as principal.
PAGCOR, as the alleged principal of ABS Corp., for the
USD 2.1M worth of gambling chips which were denied Implied Agency Apparent Agency or Agency
encashment by PAGCOR employees. by Estoppel
It is derived from: It is based on estoppel and can
a) the acts of the principal, arise from two instances:
RESPONDENT PAGCOR’S CONTENTION: b) his silence or lack of 1) The principal may
That petitioner is not a PAGCOR player, but a junket action, or knowingly permit the
player of ABS. And that PAGCOR posted a notice written c) his failure to repudiate agent to hold himself out
the agency, knowing that as having such authority,
in English and Korean language that the ABS is solely another person is acting and the principal becomes
accountable for all playing chips wagered on the tables on his behalf without estopped to claim that the
and the any financial agreement shall be binding between authority. (ART. 1869) agent does not have such
the ABS and its players. Hence, PAGCOR disclaimed authority.
2) The principal may clothe
liability. the agent with the indicia
of authority as to lead a
TC favored PAGCOR and dismissed petitioner’s reasonably prudent person
complaint. CA AFFIRMED. to believe that the agent
actually has such authority.[
Being an actual agency, it is a There is no agency at all, but
PETITIONER’S CONTENTION: fact to be proved by deductions the one assuming to act as agent
PAGCOR is liability as a presumed principal on the basis or inferences from other facts. has apparent or ostensible,
of implied agency or agency by estoppel, based on the although not real, authority to
represent another.
ff. acts and conduct of PAGCOR:
1. Three floors of the Grand Boulevard Hotel[52] The law makes no presumption of agency and proving
were leased to PAGCOR for conducting its existence, nature and extent is incumbent upon
gambling operations;[53] the person alleging it.
2. Of the three floors, PAGCOR allowed ABS Acts and conduct of PAGCOR negates the existence
Corporation to use one whole floor for foreign of an implied agency or an agency by estoppel.

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The basis for agency is representation,[58] that is, the
agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the
same legal effect as if they were personally executed by
the principal.[59] On the part of the principal, there must
be an actual intention to appoint or an intention
naturally inferable from his words or actions, while on
the part of the agent, there must be an intention to
accept the appointment and act on it. [60] Absent such
mutual intent, there is generally no agency.
Corporation. The facts that he enjoyed special
treatment upon his arrival in Manila and special
accommodations in Grand Boulevard Hotel, and that
he was playing in special gaming rooms are all
indications that petitioner cannot claim good faith that he
believed he was dealing with PAGCOR. Petitioner cannot
be considered as an innocent third party and he
cannot claim entitlement to equitable relief as well.
Petitioner asserts that PAGCOR ratified the acts of
ABS Corporation. (LACKS MERIT)

A. NO IMPLIED AGENCY
There is no implied agency in this case because
PAGCOR did not hold out to the public as the
principal of ABS Corporation. PAGCOR's actions did
not mislead the public into believing that an agency can
be implied from the arrangement with the junket
operators, nor did it hold out ABS Corporation with any
apparent authority to represent it in any capacity. The
The trial court has declared, and we affirm, that the
Junket Agreement is void. A void or inexistent contract
is one which has no force and effect from the very
beginning. Hence, it is as if it has never been entered
into and cannot be validated either by the passage of
time or by ratification.
WHEREFORE, we DENY the petition. We AFFIRM the Court of Appeals' Decision dated
27 May 2003 as well as the Resolution dated 7 May 2004 as modified by this Decision.

Junket Agreement was merely a contract of lease of

facilities and services.

The players brought in by ABS Corporation were covered

by a different set of rules in acquiring and encashing
chips. The players used a different kind of chip than what
was used in the regular gaming areas of PAGCOR, and
that such junket players played specifically only in the
third floor area and did not mingle with the regular patrons
of PAGCOR. Furthermore, PAGCOR, in posting notices
stating that the players are playing under special rules,
exercised the necessary precaution to warn the
gaming public that no agency relationship exists.

A. NO AGENCY BY ESTOPPEL

An agency by estoppel, which is similar to the doctrine

of apparent authority requires proof of reliance upon
the representations, and that, in turn, needs proof that
the representations predated the action taken in
reliance.[62]

There can be no apparent authority of an agent

without acts or conduct on the part of the principal
and such acts or conduct of the principal must have been
known and relied upon in good faith and as a result of
the exercise of reasonable prudence by a third person as
claimant, and such must have produced a change of
position to its detriment.

Such proof is lacking in this case. In the entire duration

that petitioner played in Casino Filipino, he was dealing
only with ABS Corporation, and availing of the
privileges extended only to players brought in by ABS
11

A1874 – ESTATE OF LINO OLAGUER VS ONGJOCO (2008)
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES
– Where no power of authority to sell real property was presented in
writing, it is as if no such authority was given, and the sale is void. Where
there is a mere general power of authority presented, and not a SPA, it
is deemed sufficient if the special authority to sell real property was
already incorporated in the general power of authority.
++SUPPOSED PRINCIPAL: VIRGILIO, the son, in whose name the title was issued
++SUPPOSED AGENT: JOSE, the father, who caused the sale to buyer Ongjoco
FACTS:
This involves Lot No. 76, which was later subdivided but originally
belonging to the estate of deceased Lino Olaguer. The ff. events
transpired:
Initially, the deceased’s wife Olivia Olaguer was appointed as
administrator, along with Eduardo Olaguer. In the order of the probate
court, some properties of the estate were authorized to be sold to pay
the obligations of the estate. Pursuant to this authority, administrators
Olivia & Eduardo sold 12 parcels of land to Pastor Bacani, who later
resold it back to said administrators. Lot 76 was among the 12 lots.
Meanwhile, Olivia was remarried to Jose Olaguer. Thereafter, Olivia
executed a SPA in favor of her Jose (2nd husband), authorizing the latter
to “sell, mortgage, assign, transfer, endorse, and deliver” certain
properties.
It appears the Jose (2nd husband) caused the subdivision of Lot 76 into
11 lots (A-K). Thereafter, by virtue of the SPA given by Olivia, Jose sold
to his son Virgilio Lots 76-B, C, D, E, F, & G. Lots 76-B & & & 76-C was
subdivided anew and designated as Lot No. 1 & 2.
Thereafter, Jose, claiming to be the attorney-in-fact of his son Virgilio
under a “general power of attorney” sold Lot Nos. 1 & 2, 76-D, E, F,
& G to Emiliano Ongjoco (respondent).
This prompted the Estate of Lino Olaguer, as represented y the heirs
(petitioner) to file an Action for Annulment of Sales of Real Property
and/or Cancellation of Titles. In an amended complaint, they
impleaded respondent Ongjoco as defendant for the sale of Lot No. 76.
PETITIONER’S CONTENTION:
That the power of attorney referred to by Jose as his authority for the
sale to Ongjoco (respondent) was never presented. Hence, the salee
were void.
RESPONDENT’S CONTENTION:
That Jose was duly authorized by a written power of attorney when the
properties were sold to him. This validated the sales of the properties.
ISSUE: WON there was sufficient authority to sell the lots by
virtue of a power of attorney. (PARTLY YES AND NO)
HELD: We distinguish:
A. With respect to Lots No. 1 & 2
When Lots Nos. 1 and 2 were sold to respondent Ongjoco
through Jose A. Olaguer, the Transfer Certificates of Title of
said properties were in Virgilio's name.[37] Unfortunately for
respondent, the power of attorney that was purportedly issued
by Virgilio in favor of Jose Olaguer with respect to the sale of
Lots Nos. 1 and 2 was never presented to the trial
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court. Neither was respondent able to explain the
omission. Other than the self-serving statement of respondent,
no evidence was offered at all to prove the alleged written power
of attorney. This of course was fatal to his case.
As it stands, there is no written power of attorney to speak
of. The trial court was thus correct in disregarding the claim of
its existence. Accordingly, respondent Ongjoco's claim of good
faith in the sale of Lots Nos. 1 and 2 has no leg to stand on.
B. With respect to Lots No. 76-D,E,F,G
Ongjoco was able to present a general power of attorney that
was executed by Virgilio Olaguer. While the law requires a
special power of attorney, the general power of attorney
was sufficient in this case, as Jose A. Olaguer was expressly
empowered to sell any of Virgilio's properties; and to sign,
execute, acknowledge and deliver any agreement
therefor.[38] Even if a document is designated as a general
power of attorney, the requirement of a special power of attorney
is met if there is a clear mandate from the principal specifically
authorizing the performance of the act.[39] The special power of
attorney can be included in the general power when the act or
transaction for which the special power is required is specified
therein.[40]
On its face, the written power of attorney contained the signature
of Virgilio Olaguer and was duly notarized. As such, the same
is considered a public document and it has in its favor the
presumption of authenticity and due execution, which can
only be contradicted by clear and convincing evidence.[41]
No evidence was presented to overcome the presumption in
favor of the duly notarized power of attorney. Neither was there
a showing of any circumstance involving the said document that
would arouse the suspicion of respondent and spur him to
inquire beyond its four corners, in the exercise of that
reasonable degree of prudence required of a man in a similar
situation. We therefore rule that respondent Ongjoco had every
right to rely on the power of attorney in entering into the
contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.
WHEREFORE, premises considered, the instant petition is hereby PARTIALLY
GRANTED. The assailed Decision of the Court of Appeals dated 27 February 2006 in CA-G.R.
CV NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July 2001 of the
Regional Trial Court of Legazpi City, Branch 6, and the Order dated 23 July 2001 shall read as
follows:
4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered reverted back to
the estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision,
defendant Emiliano M. Ongjoco is hereby ordered to execute the necessary deed of
reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said reconveyance
and have the same registered with the Register of Deeds so that new titles shall be issued in
the name of the estate of Lino Olaguer and the titles of Emiliano Ongjoco cancelled.
12

A1874 – MACTAN CEBU INTERNATIONAL AIRPORT
AUTHORITY VS UNCHUAN (2016)
R/T ART. 1874 – WRITTEN AUTHORITY, REQUIRED TO SELL IMMOVABLES
– CORRELATE: ART. 1878 – SPA REQUIRED TO TRANSFER OWNERSHIP
OF IMMOVABLES – Without SPA, the alleged agent could not be legally
considered a representative. And his act of conveying cannot be a valid
source of obligation to bind all the other registered co-owners and their
heirs. The other heirs could not have given their consent, because there
was no meeting of the minds among the other registered co-owners
who gave no written authority to Atanacio to transact on their behalf.
– EFFECT OF NO SPA TO THE SALE - VOID, insofar as the other supposed
represented co-owners are concerned – VALID, insofar as the co-owner
who acted as agent is concerned since he has the right to dispose of his
undivided share to others.
++ALLEGED PRINCIPAL: HEIRS OF EUGENIO GODINEZ, original registered owners
++ALLEGED AGENT: ATANACIO GODINEZ, the co-owner who, as supposed
representative of the heirs, sold the subject lots to CAA.
FACTS:
This involves Lot No. 4810-A & 4810-B, originally registered
under the names of the Heirs of Eugenio Godinez.
According to Richard Unchuan (respondent), he was the
rightful owner of the subject lots through Deeds of Absolute
Sale executed between him and the Heirs on Dec 7 1998.
Problem is, Unchuan discovered that Atanacio Godinez,
alleging to be the attorney-in-fact of all the Heirs, already sold
both lots to Civil Aeronautic Administration (CAA), the
predecessor of MCIAA, as early as Apr 3 1958.
This prompted Unchuan to file a Complaint for Declaration of
Nullity of the Deed of Absolute Sale against MCIAA, alleging
that Atanacio was not authorized by the Heirs to sell their
undivided shares.
PETITIONER MCIAA’S CONTENTION:
That Atanacio acted as the representative of the Heirs in
selling the lots to the Republic of the Philippines, as represented
by CAA. This is corroborated by the Deed of Partition signed on
Sep 17 1969 by Atanacio, along with other former registered co-
owners, attesting to the fact of sale in favor of the government.
RTC favored Unchuan; finding that Atanacio was not clothed
with a SPA to sell the disputed lots. CA AFFIRMED. Hence, the
petition.
ISSUE:
a) WON Atanacio acted validly represented the Heirs.
(NO VALID REPRESENTATITION)
b) WON the sale executed by Atanacio with CAA is valid.
(PARTLY VALID)
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HELD: Atanacio did not validly represented the Heirs in the
absence of the written authority required under Art. 1874 &
1878, NCC, whenever real property is involved. As a result, the
sale is void for lack of consent of the heirs, but this is only with
respect to the shares of the co-owner heirs. With respect to
Atanacio’s shares, on the other hand, the sale is valid.
A. VOID WITH RESPECT TO THE CO-OWNERS, FOR
LACK OF SPA
Without a special power of attorney specifying his authority to
dispose of an immovable, Atanacio could not be legally
considered as the representative of the other registered co-
owners of the properties in question. Atanacio's act of
conveying Lot No. 4810-A and Lot No. 4810-B cannot be a
valid source of obligation to bind all the other registered co-
owners and their heirs because he was not clothed with any
authority to enter into a contract with CAA. The other heirs
could not have given their consent as required under Article
147550 of the New Civil Code because there was no meeting
of the minds among the other registered co-owners who
gave no written authority to Atanacio to transact on their
behalf. Therefore, no contract was perfected insofar as the
portions or shares of the other registered co-owners or their
heirs were concerned.
HOWEVER: The transaction entered into by Atanacio and CAA,
however, was not entirely void because the lack of consent
by the other co-owners in the sale was with respect to their
shares only.
B. VALID WITH RESPECT TO ATANACIO’S SHARE
Although the sale transaction insofar as the other heirs of the
registered owners was void, the sale insofar as the extent
of Atanacio's interest is concerned, remains valid.
ART. 493 recognizes the absolute right of a co-owner to
freely dispose of his pro indiviso share as well as the fruits
and other benefits arising from that share, independently of the
other co-owners. The sale of the subject lots affects only the
seller's share pro indiviso, and the transferee gets only what
corresponds to his grantor's share in the partition of the
property owned in common. Since a co-owner is entitled to sell
his undivided share, a sale of the entire property by one co-
owner without the consent of the other co-owners is not null
and void; only the rights of the co-owner/seller are
transferred, thereby making the buyer a co-owner of the
property.
In the instant case, Atanacio was still one of the registered co-
owners of the subject lots. Thus, he effectively sold his undivided
share to CAA and, as a result, CAA became a co-owner of the
undivided subject lots. Hence, with respect only to Atanacio’s
share, the sale is still valid.
WHEREFORE, judgment is hereby rendered declaring that:
a) The Deed of Sale signed by Atanacio Godinez alienating the lands denominated as Lot No. 4810-A and Lot
No. 4810-B in favor of MCIAA's predecessor-in-interest is VALID, insofar as his undivided share in the said
lots is concerned, but VOID, insofar as the undivided shares of the other registered owners, who did not sign
the deed, are concerned; and
b) Plaintiff Richard E. Unchuan is the true and legal owner of portions of Lot No. 4810-A and Lot No. 4810-B
consisting of One Hundred Forty Nine Thousand Nine Hundred Thirty (149,930) Square Meters.
13

A1878 – WOODCHILD HOLDINGS VS ROXAS ELECTRIC (2004)
R/T ART. 1878 – SPA ON REAL RIGHTS OVER IMMOVABLE – e.g.
conveyance of road right-of-way – REQUIRES PUBLIC INSTRUMENT.
DOCTRINE OF APPARENT AUTHORITY, BURDEN TO PROVING: (a) the acts
of the respondent justifying belief in the agency by the petitioner; (b)
knowledge thereof by the respondent which is sought to be held; and (c)
reliance thereon by the petitioner consistent with ordinary care and
prudence. – RATIFICATION MUST BE IN WRITING, if writing is required to
grant an authority to do a particular act. IF NOT RATIFIED,
UNENFORCEABLE.
++PRINCIPAL: RECCI, as owner of the 2 parcels of land
++AGENT: ROBERTO ROXAS, the president of RECCI who was authorized under the
BOD resolution, but has exceeded from his powers.
FACTS:
This involves the 2 parcels of land owned by Roxas
Electric and Construction Company, Inc. (RECCI, the
respondent), namely:
a) Lot No. 491-A-3-B-1 (1st lot, for brevity), a portion
of which was a dirt road (the road right-of-way)
accessing to Sumulong Highway; and
b) Lot No. 491-A-3-B-2 (2nd lot, for brevity), which
was the original subject of the disputed sale in
this case.
It all started when RECCI’s Board of Directors approved
a resolution authorizing Roberto Roxas (its president) to
sell the 2nd lot.
Eventually, acting upon said authority, Roberto sold the
2nd lot to Woodchild Holdings, Inc. (WHI) through its
president Jonathan Dy. However, among the terms and
conditions under the Deed of Absolute Sale is that
Roberto Roxas shall convey 25 sq. m. of the 1st lot for
purposes of the road right-of-way, as to grant access to
WHI’s vehicles.
Later, WHI complained to Roberto that RECCI’s vehicles
were parked on a portion of the 1st lot over which WHI had
been granted a ROW. So, Roberto promised to look into
the matter, and it was discussed that WHI would have to
buy 500 sq.m. portion of the 1st lot.
Problem is, Roberto died in the process. So, WHI
requested and later demanded from RECCI for the sale
of the 1st lot. But, RECCI rejected.
This prompted WHI to file a complaint for specific
performance and damages against RECCI.
RESPONDENT RECCI’S CONTENTION:
Bgn Digests
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That it never authorized Roberto Roxas to grant the
beneficial use, nor to sell, any portion of the 1st lot, since
the resolution only covers the 2nd lot.
TC favored WHI; granting the beneficial use of the RROW
and the sale of the 1st lot; that RECCI was estopped from
disowning the apparent authority of Roberto Roxas,
otherwise it would prejudice WHI which transacted with
Roberto in good faith.
CA REVERSED; relying on the resolution of the RECCI-
BOD which merely granted Roberto the authority to sell
the 2nd lot only; and it does not cover the grant of RROW
from the 1st lot.
ISSUE: WON Roberto Roxas validly acted as agent of
RECCI when he included the conveyance of the 1st lot,
although the BOD resolution covers only the 2 nd lot. (NO,
NOT AGENT)
HELD: Roberto did not validly acted as RECCI’s agent
when he included the conveyance of the 1st lot, although
the BOD resolution covers only the 2nd lot.
Generally, the acts of the corporate officers within the
scope of their authority are binding on the corporation.
However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority
cannot bind the corporation unless it has ratified such
acts expressly or tacitly, or is estopped from denying
them.
A. NO SPECIAL POWER OF ATTORNEY
Roberto was not specifically authorized. Roberto’s
authority under the resolution is limited to the selling of the
2nd lot, and it does not include any authority to sell or
convey real rights on the 1st lot.
Under paragraph 12, Article 1878 of the New Civil Code,
a special power of attorney is required to convey real
rights over immovable property.[26] Article 1358 of the
New Civil Code requires that contracts which have for
their object the creation of real rights over immovable
property must appear in a public document.
B. NO APPARENT AUTHORITY
PETITIONER WHI’S CONTENTION: in allowing Roxas
to execute the contract to sell and the deed of
absolute sale and failing to reject or disapprove the
same, the respondent thereby gave him apparent
authority to grant a right of way over Lot No. 491-A-3-
B-1 and to grant an option for the respondent to sell a
portion thereof to the petitioner. (LACKS MERIT)
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IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the

Absent estoppel or ratification, apparent authority assailed Decision of the Court of Appeals WITH MODIFICATION. The respondent is

cannot remedy the lack of the written power required ordered to pay to the petitioner the amount of P5,612,980 by way of actual damages and

under the statement of frauds.[31] In addition, the P100,000 by way of attorney’s fees. No costs.

petitioner’s fallacy is its wrong assumption of the

unproved premise that the respondent had full
knowledge of all the terms and conditions contained
in the deed of absolute sale when Roxas executed it.

For the principle of apparent authority to apply, the

petitioner was burdened to prove the following: (a) the
acts of the respondent justifying belief in the agency
by the petitioner; (b) knowledge thereof by the
respondent which is sought to be held; and, (c) reliance
thereon by the petitioner consistent with ordinary care
and prudence.[34] In this case, there is no evidence on
record of specific acts made by the respondent [35]
showing or indicating that it had full knowledge of
any representations made by Roxas to the petitioner
that the respondent had authorized him to grant to the
respondent an option to buy a portion of Lot No. 491-A-3-
B-1 covered by TCT No. 78085, or to create a burden or
lien thereon, or that the respondent allowed him to do so.

C. NO RATIFICATION

PETITIONER WHI’S CONTENTION: that by receiving

and retaining the P5,000,000 purchase price of Lot
No. 491-A-3-B-2, the respondent effectively and
impliedly ratified the grant of a right of way on the
adjacent lot, Lot No. 491-A-3-B-1, and to grant to the
petitioner an option to sell a portion thereof,

It bears stressing that the respondent sold Lot No. 491-A-

3-B-2 to the petitioner, and the latter had taken
possession of the property. As such, the respondent
had the right to retain the P5,000,000, the purchase
price of the property it had sold to the petitioner.

Moreover, if a writing is required to grant an authority

to do a particular act, ratification of that act must also
be in writing.[37] Since the respondent had not ratified
the unauthorized acts of Roxas, the same are
unenforceable.

In sum, Roberto Roxas was not granted a SPA to sell or

convey real rights over an immovable property (i.e.
RROW in 1st lot). There was also no apparent authority as
there was no evidence of specific acts conducted by the
principal (RECCI) showing it had full knowledge of
Roberto’s representations. Finally, there was no
ratification in writing by RECCI. Hence, the alleged sale is
unenforceable.

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A1878 – SHOPPER’S PARADISE REALTY VS ROQUE (2004) or in behalf of another with the consent of the latter.[9]
R/T ART. 1878 – SPA IN LEASE OF REAL PROPERTY FOR MORE THAN 1 Article 1878 of the Civil Code expresses that a special
power of attorney is necessary to lease any real
YEAR – Where the supposed agent enters into a 25-year lease contract property to another person for more than one
with a third person, the agent is not merely performing an act of year. The lease of real property for more than one year
administration, but an act of strict dominion or ownership. Hence, SPA
is considered not merely an act of administration but an
act of strict dominion or of ownership.
is necessary.
Besides, during their negotiation, petitioner Shoppers, through its representatives, was
++ALLEGED PRINCIPAL: EFREN ROQUE, as owner of the subject lot by way of DIV
apprised of the fact that the subject property actually belonged to the respondent.
++ALLEGED AGENT: DR. FELIPE ROQUE, who entered into a 25 yr lease contract over
the subject lot with Shoppers’
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals
FACTS:
declaring the contract of lease and memorandum of agreement entered into between Dr.
This involves a parcel of land originally registered in the
Felipe C. Roque and Shopper’s Paradise Realty & Development Corporation not to be
name of late Dr. Felipe Roque which was:
binding on respondent is AFFIRMED. No costs.
a) Donated inter vivos to his son Efren (respondent)
on Dec 26 1978;
b) But subject of the 25-year lease contract ^ MOA
to construct entered into between Dr. Roque and
Shopper’s Paradise (petitioner) on Dec 23 1993.

The dispute arose when petitioner Shopper’s and Dr.

Roque agreed to have the contract of lease and MOA
annotated on the title. But, this was never made because
of the untimely death of Dr. Roque. So, Shopper’s was
constrained to deal with Dr. Roque’s son, Efren
(respondent). Unfortunately, the negotiations broke down
due to some disagreements.

Later, however, Efren (respondent) filed a Case for

Annulment of the COL & MOA, alleging:
a) that he had long been the absolute owner of the
property by virtue of the donation inter vivos
executed by his parents in his favor;
b) that the late Dr. Roque had no authority to enter
into the assailed agreements with Shopper’s;
c) that when Efren left for USA, he merely delegated
to his father the administration of the property.

TC dismissed the complaint, in favor of Shopper’s; finding

that the Deed of Donation was not registered, hence not
binding against third persons, like Shopper’s.

CA REVERSED, in favor of Efren, finding that Shoppers’

was not a lessee in good faith, having prior knowledge of
the donation in favor of Efren.

ISSUE: WON Dr, Felipe Roque validly acted as agent of

his son. (NO, NOT AGENT)

HELD: Dr. Felipe Roque was not an agent of his son.

It was not shown that Dr. Felipe C. Roque had been an

authorized agent of respondent.

In a contract of agency, the agent acts in representation

16

A1878 – DOMINION INSURANCE VS CA (2002)
R/T ART. 1878 – SPA IN SETTLEMENT OF INSURANCE CLAIMS – The
payment or settlement of insurance claims on behalf of the insurer
(principal) is not an act of administration, but rather of strict dominion,
which requires an SPA.
R/T ART. 1918 – AGENT’S LIABILITY – UNDER LAW ON AGENCY,
PERSONALLY LIABLE FOR ACTS BEYOND THE SCOPE OF AUTHORITY - BUT
UNDER THE GENERAL LAW ON OBLICON, MAY BE REIMBURSED TO THE
EXTENT THAT THE DEBTOR (INSURER) WAS BENEFITED TO PREVENT
UNJUST ENRICHMENT.
++PRINCIPAL: DOMINION INSURANCE CORP., as the insurer
++AGENT: RODOLFO GUEVARRA, as the agency manager who settled claims in behalf
of the insurer.
FACTS:
This involves the insurer’s liability being extinguished by
the settlement of claims done by its agent. Now, the agent
seeks reimbursement,
The insurer is Dominion Insurance Corp. (petitioner). It
appointed Rodolfo Guevarra (respondent) as agency
manager by virtue of the ff:
(1) SPA, granting it authority to perform general
business transactions in behalf of the corporation;
and
(2) Memorandum of Management Agreement,
which enumerated Guevarra's duties and
responsibilities, particularly the authority to settle
and dispose of all motor car claims, in the amount
of P5K with prior approval of the Regional Office,
and full authority on TPPI claims settlement. But
this was limited by the written standard
authority to pay, which states that the payment
shall come from Guevarra’s revolving fund or
collection.
Problem is, when insurance claims were being filed by
insurer Dominion’s clients, respondent Guevarra
advanced P156,473.90 in his capacity as manager to
satisfy said claims. However, when he demanded
reimbursement from the insurance company, Dominion
refused. This prompted Mngr. Guevarra to file the civil
case for sum of money against insurer Dominion.
LC favored Guevarra. CA AFFIRMED.
ISSUE:
a) WON Guevarra acted within his authority as
agent for Dominion. (NOT REALLY)
b) WON Guevarra is entitled to reimbursement of
amounts he paid
Bgn Digests
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HELD: Guevarra acted beyond the scope of his authority
as agent for Dominion. Although under the law on agency,
Guevarra shall be personally liable for it; however, under
the law on contracts, he may still be reimbursed under the
principle of unjust enrichment.
There is no dispute that Guevarra is Dominion’s agent
based on the SPA. But the SC held that, despite the
word “special” in the title of the document, the contents
reveal that what was constituted was actually a
“general” agency. It comprises all the business of the
principal, but couched in general terms. It is limited only
to acts of administration.
The questioned act was the “payment/settlement of
claims”. This is not an act of administration, but rather
of strict dominion which requires an SPA under ART.
1878 (1) & (15). This was not included in the said SPA.
Instead, Guevarra’s authority to settle claims is embodied
in the Memorandum of Management Agreement,
granting authority to settle and dispose of all motor car
claims, and full authority on TPPI claims settlement.
However, this is further limited by the written standard
authority to pay, which states that the payment shall
come from Guevarra’s revolving fund or collection
(NOT FROM HIS PERSONAL FUNDS).
The principal’s instruction was to pay using Guevarra’s
revolving funds/collection. But Guevarra instead paid
using his personal funds.
Thus, Guevarra, although authorized to settle claims,
deviated from the instructions of the principal. As a result,
under ART. 1918 under the law on agency, Guevarra may
not be reimbursed by its principal.
Nonetheless, Guevarra may still recover under the
general law on obligations and contracts, but only insofar
as the payment has been beneficial to Dominion (under
ART. 1235, 2nd par., NCC). Otherwise, it would result in
unjust enrichment of Dominion.
IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the
Court of Appeals[28] and that of the Regional Trial Court, Branch 44, San Fernando,
Pampanga,[29] in that petitioner is ordered to pay respondent Guevarra the amount of
P112,672.11 representing the total amount advanced by the latter in the payment of the
claims of petitioner’s clients.
17

A1878 – ADRIANO VS PANGILINAN (2002)
R/T ART. 1878 – SPA IN MORTGAGE LOAN – Petitioner’s act of entrusting
his TCT to his distant relative was for the purpose of helping him find a
money lender. Not having executed a SPA in her favor, the petitioner
clearly did not authorize her to be his agent in procuring the mortgage.
++ALLEGED PRINCIPAL: GUILLERMO ADRIANO, the registered owner
++ALLEGED AGENT: ANGELINA SALVADOR, the distant relative with whom the
owner’s TCT was entrusted
FACTS:
This involves a parcel of land registered under the name
of Guillermo Adriano (petitioner). However, he entrusted
the original owner’s copy of the TCT to Angelina
Salvador, a distant relative, for the purpose of securing a
mortgage loan.
Problem is, without Adriano’s knowledge and consent,
Angelina mortgaged the property to Romulo
Pangilinan (respondent).
Knowing this, Adriano demanded for the reconveyance of
the property from Pangilinan. But the latter refused, hence
the complaint.
RESPONDENT’S CONTENTION:
That petitioner voluntarily entrusted the TCT to
Angelina for the purpose of securing a loan, thereby
creating a principal-agent relationship between
petitioner and Angelina. As a result, the REM was
executed within the scope of authority granted to
Angelina. Hence, valid REM.
RTC favored petitioner Adriano and ordered for
reconveyance. CA REVERSED on the basis of the
entrustment of the title to Angelina. Hence, the petition.
ISSUE: WON a contract of agency was created when
Adriano entrusted his title to Angelina. (NO AGENCY)
HELD: No contract of agency was created.
Petitioner’s act of entrusting and delivering his TCT and
Residence Certificate to Salvador was only for the
purpose of helping him find a money lender. Not
having executed a power of attorney in her favor, he
clearly did not authorize her to be his agent in
procuring the mortgage. Article 1878 of the Civil
Code provides:
“Art. 1878. Special powers of attorney
are necessary in the following cases:
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Xxx (7) To loan or borrow money, unless
the latter act be urgent and
indispensable for the preservation of the
things which are under administration;
Xxx (12) To create or convey real rights
over immovable property.”
As to other issues:
1. The REM was void because: (a) the mortgagor’s
signature was forged, and (b) an impostor
pretended to be the mortgagor when the
mortgagee made an ocular inspection of the
subject property.
2. Petitioner cannot be faulted for entrusting his TCT
to his “distant relative” Angelina for purposes of
securing a mortgage. In fact, Pangilinan was not
an innocent mortgagee for value. He failed to
observe due diligence in the grant of the loan and
in the execution of the REM. Since he was
engaged in the real estate business, he is
expected to ascertain the status and condition of
the properties offered to him as collaterals, as
well as to verify the identities of the persons he
transacts business with. (He merely testified that
he “assumed” the poser of Guillermo Adriano to
be the owner. Also, he knew that the property was
being leased, but he never verified from the
lessees whether the claimed owner was indeed
their lessor.) Because Pangilinan failed to verify
whether the mortgagor was really the owner of
the property sought to be mortgaged, he must
bear the consequences of his negligence.
WHEREFORE, the Petition is GRANTED and the assailed Decision SET ASIDE. The
November 25, 1993 Decision of the RTC of San Mateo, Rizal (Branch 76) is hereby
REINSTATED. No costs.
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A1878 – PP VS CARPO (2001)
R/T ART. 1878 – SPA IN COMPROMISE OF CIVIL LIABILITY IN CRIMINAL
CASE – An oral compromise to limit civil liability entered into by the
defense counsel with the public prosecutor is invalid. SPA is necessary.
In the absence of SPA, the counsel can neither bind nor compromise his
client’s civil liability.
++ALLEGED PRINCIPAL: THE ACCUSED
++ALLEGED AGENT: THE DEFENSE COUNSEL, by way of oral compromise (invalid)
FACTS:
This involves a criminal case for the complex crime of
multiple murder with attempted murder, caused by the
hurling of a hand grenade into the bedroom, of the Dulays,
leading to an explosion and the subsequent death of
Florentino, Norwela, and Nissan Dulay and the wounding
of Noemi Dulay.
The accused were: Jaime Carpo, Oscar Ibao, Warlito Ibao, and Roche Ibao.
Apparently, during trial, the counsel for the defense
entered into an oral compromise with the public
prosecutor, which was subsequently ratified through
signature by the private complainant (Teresita Dulay),
limiting that amount of civil liability to P600K (from
P1,282,740).
ISSUE: WON the oral compromise by the counsel for the
defense was valid. (NOT VALID)
However, insofar as Teresita was concerned, she was
apprised of the agreement and in fact had signed her
name as instructed by the court, thereby tacitly ratifying
the same.
As for accused-appellants, the aforecited dialogue
between the court and counsel does not show that they
were ever consulted regarding the proposed
settlement. In the absence of a special power of
attorney given by accused-appellants to their
counsel, the latter can neither bind nor compromise
his clients' civil liability. Consequently, since Atty.
Sanglay and Atty. Rafael had no specific power to
compromise the civil liability of all accused-
appellants, its approval by the trial court which did not
take the precautionary measures to ensure the protection
of the right of accused-appellants not to be deprived of
their property without due process of law, could not
legalize it. For being violative of existing law and
jurisprudence, the settlement should not be given force
and effect.
WHEREFORE, the assailed Decision of the trial court finding accused-appellants JAIME
CARPO, OSCAR IBAO, WARLITO IBAO and ROCHE IBAO GUILTY of the complex
crime of multiple murder with attempted murder and sentencing them to the supreme
penalty of death is AFFIRMED with the MODIFICATION that they are ordered to pay the
heirs of the deceased Florentino, Norwela and Nissan, all surnamed Dulay, P50,000.00
as death indemnity and P50,000.00 as moral damages for each death or an aggregate
amount of P300,00.00. In addition, accused-appellants are ordered to pay Noemi Dulay
P30,000.00 as indemnity for her attempted murder. Costs against accused- appellants.

HELD: An oral compromise by the defense counsel was

invalid.

As to the attorney’s power to compromise:

a) ART. 1878, NCC requires a SPA “to compromise,
to submit questions to arbitration, to renounce the
right to appeal from a judgment, to waive
objections to the venue of an action or to abandon
a prescription already required”;
b) SEC. 23, RULE 138, ROC requires special
authority in favor of the attorney to “compromise
their client’s litigation or receive anything in
discharger of their client’s claims but the full
amount in cash”.

The requirements under both provisions are met when

there is a clear mandate expressly given, by the
principal to his lawyer specifically authorizing the
performance of an act.

In this case, counsel for both parties had no special

power of attorney from their clients to enter into a
compromise.

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A1878 – ANACLETO VS VAN TWEST (2000)
R/T ART. 1878 – SPA IN COMPROMISE, MANDATORY – COMPROMISE
AGREEMENT IS INVALID IF COUNSEL SIGNED, IN REPRESENTATION OF
HIS CLIENT, WITHOUT SPA TO COMPROMISE – IF CLIENT IS A
CORPORATION, SPA MUST BE GIVEN BY THE BOARD OF DIRECTORS.
++Principal: Alexander van Twest and/or Euroceanic, the complainant-respondents
++Agent: Atty. Perez, the one who filed the complaint in behalf of the complainants, and
who entered into the compromise agreement with petitioners.
FACTS:
This arose from a complaint for reconveyance of title
filed by Atty. Ernesto Perez, in the name of Alexander
Van Twest and Euroceanic (respondents), as against
Gloria Anacleto (petitioner) and Isaias Bongar, on Feb 6
1995.
According to Atty. Perez, Van Twest, has been reported
missing since June 16, 1992, but is duly represented by
said Atty. Perez as his agent/or general counsel.
Eventually, a compromise agreement was entered into
by petitioner Anacleto and Atty. Perez, in representation
of Van Twest. It was stipulated therein that petitioner
Anacleto shall pay the debts directly to Atty. Perez. The
TC rendered judgment based on the said compromise
agreement.
However, Petitioner Anacleto, represented by new
counsel, filed an urgent omnibus motion asking the
Court to order Atty. Perez to submit a SPA, and in the
meantime to defer petitioner’s compliance with her
obligation under the compromise agreement.
ATTY. PEREZ’ CONTENTION:
Although Atty. Perez admitted that he had no SPA from
Van Twest to enter into a compromise agreement, he
claims that Petitioner Anacleto is estopped from denying
his authority since petitioner’s former counsel (law firm of
Salonga, Hernandez, and Allado) was informed of this
fact. The TC & CA sustained this argument.
ISSUE:
a. WON a lawyer, in representation of his client,
may enter into a compromise agreement in the
absence of a SPA. (NO, SPA IS MANDATORY)
b. WON petitioner is estopped from denying the
absence of the SPA for having been informed of
such fact during the negotiations. (NOT
ESTOPPED)
HELD: A lawyer, in representation of his client
(respondent), cannot enter into a compromise agreement
without a SPA. Even if the petitioner was aware of the
absence of the SPA from the start of the negotiations, the
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petitioner cannot be held to be in estoppel, since the SPA
is a mandatory requirement.
A. ATTY. PEREZ IS WITHOUT SPA TO
COMPROMISE
1. With respect to respondent Van Twest:
Atty. Perez admitted that his only authority to represent
is the retainer agreement he had with Van Twest.
However, this did not include a special authority to
enter into a compromise agreement.
Rule 138, Sec. 23 provides that attorneys cannot,
without special authority, compromise their client’s
litigation. Furthermore, Article 1878(3), NCC provides
that SPAs are necessary to compromise.
Indeed, a SPA constituting Atty. Perez as attorney-in-fact
is necessary.
2. With respect to respondent Euroceanic:
It should be noted that the action for reconveyance filed
by Atty. Perez was brought not only in behalf of Van Twest
but also of Euroceanic, a juridical person.
As a rule, the power to compromise or settle claims in
favor of or against the corporation is vested in the
board of directors.
Hence, in the absence of any authorization from the
board of directors of Euroceanic, Atty. Perez could
not file any suit in its behalf, regardless of the fact that
Van Twest was the former chairman of its board.
B. ESTOPPEL DOES NOT APPLY.
The CA held that petitioner is estopped to deny Atty.
Perez’ authority to represent respondents because
petitioner knew from the start of the negotiations for the
compromise agreement that Atty. Perez had no SPA.
(LACKS MERIT)
Estoppel does not apply. Although petitioner’s former
counsel knew that Atty. Perez had no SPA, said counsel
nonetheless negotiated with him because of his
representation that he was the representative of Van
Twest and that he could secure an SPA from the heirs
of Van Twest. Petitioner was thus well within her right in
relying upon such representation of Atty. Perez.
Of importance is paragraph 5 of the compromise
agreement which provides that “[t]he signatories to this
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Agreement hereby represent and warrant that they are

duly authorized to execute this Agreement.”

By virtue of this provision, petitioner had the right to

require Atty. Perez to secure the necessary authority from
Van Twest or the latter’s heirs as well as from Euroceanic.
Indeed, petitioner cannot be faulted for treating this
warranty as a condition precedent to her compliance
with the compromise agreement since the requirement
of special authority is mandatory and a lawyer’s
authority to compromise cannot simply be presumed.

C. What injury will result if we sustain the CA’s

decision in affirming the compromise
agreement despite the absence of the SPA?

The risk of sustaining the decision of the Court of Appeals

is that:
a. Of requiring petitioner to pay a debt to a
stranger, we cannot just rely on the guaranty
of Atty. Perez that he would hold any money
he receives in the cases he has filed in trust
for Van Twest and/or Euroceanic.
b. There is no stopping Van Twest and/or
Euroceanic from suing petitioner again for the
same cause of action if they are unable to
recover the money from Atty. Perez.
c. In fact, the law does not even require them to
recognize the trust unilaterally created by
Atty. Perez or first seek to recover from him.

Hence, the absence of the SPA in favor of Atty. Perez is

fatal. The fact that the compromise agreement was
approved by lower court does not make it final and
executory. Since a compromise agreement, is also a
contract, which is considered void for lack of the consent
or special authority from Van Twest and/or Euroceanic.
Hence, the compromise agreement is not enforceable.
WHEREFORE, the decision of the Court of Appeals dismissing petitioner’s action for
certiorari is hereby REVERSED and, consequently, the decision of the Regional Trial
Court, Branch 7, Manila, based on the compromise agreement of the parties, is
ANNULLED and SET ASIDE and the compromise agreement itself is declared without
force and effect.

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A1878 – LOYOLA SECURITY AND DETECTIVE AGENCY VS NLRC (1995) strict dominion. In this case, there was no
R/T ART. 1878 – SPA IN NOVATIONS, COMPROMISE, WAIVER OF showing that respondent Prado was duly
authorized by co-respondent Tuscano to
OBLIGATIONS, ANY ACT OF STRICT DOMINION – Where there is no
waive a part of the award given to her –
showing that respondent was duly authorized by co-respondent to considering that respondent Prado executed the
waive a part of the award given to the latter, a compromise agreement compromise agreement not only on his own
behalf but also on behalf of co-respondent
entered into by the respondent in his own behalf and in behalf of his co-
Tuscano.
respondent shall be void.
++PRINCIPAL: Matilde Tuscano, as co-respondent (co-employee in the labor case) Hence, being violative of existing law and jurisprudence,
++AGENT: Victor Prado Sr., as co-respondent (or co-employee) who agreed with the such settlement cannot be given force and effect.
compromise settlement and who received P5K advance from the employer, in behalf of
WHEREFORE, the petition is DISMISSED and petitioner company is ORDERED to PAY
Tuscano
private respondents the amount of P48,317.93, in addition to the partial payment of
FACTS: P43,000.00, to satisfy the monetary award which has long become final and executory.
This involves a complaint for illegal dismissal, etc. filed
by Victor Prado Sr. and Matilde Tuscano (respondents)
against Loyola Security and Detective Agency and/or GM
Ruperto Acle Jr. (petitioners).

Labor Arbiter ruled in favor of respondents. NLRC

affirmed.

So, respondents subsequently filed a Motion for Issuance

of a Writ of Execution. But thereafter, they filed a Joint
Manifestation acknowledging complete satisfaction
of the award.

However, respondents again filed a Motion for the

Issuance of an Alias Writ of Execution for the
Recovery of the Balance of the Award, claiming that
they received less than the award of LA. This motion was
granted

Petitioner moved for reconsideration, but was denied.

Hence, this petition.

PETITIONERS’ CONTENTION:
That respondent Prado’s acts of entering into a
compromise agreement and in accepting an advance of
P5,000 from petitioner Acle constituted a novation of the
award adjudged by the LA.

ISSUE: WON the compromise agreement is valid and

enforceable. (NOT VALID)

HELD: The compromise agreement is not valid:

a. There is no compliance with the NLRC rules

which requires the assistance of counsel and
approval of the LA in approving the compromise
agreement; and
b. There is no compliance with Article 1878, NCC
which requires that a SPA is necessary to effect
novations, to compromise, to waive any
obligation gratuitously, any in any other act of
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A1878 – MERCADO VS ALLIED BANKING CORP (2007)
R/T ART. 1878 – SPA IN MORTGAGE – PROPERTY IN MORTGAGE
DIFFERENT FROM PROPERTY IN SPA, UNENFORCEABLE MORTGAGE –
The SPA contains the exclusive enumeration of the properties with
which the agent is authorized to mortgage. Where the property in the
SPA and the property so mortgaged by the agent are different, e.g. in
TCT numbers and the ROD where these were registered, the REM is
unenforceable unless ratified by the principal. - SUBSEQUENT
REVOCATION – ACTUAL NOTICE SUPERIOR THAN CONSTRUCTIVE NOTICE
– Where the ROD was informed of the principal’s intent to revoke the
SPA and to require her prior consent before any mortgage or sale may
be had, this serves as an actual notice. The fact that it was not
annotated at the back of the title is of no moment, since actual notice
is superior than constructive notice. Moreover, in the case, there was
even a subsequent constructive notice when the revocation was
recorded in the ROD. – MORTGAGEE BANK NOT IN GOOD FAITH FOR
FAILURE TO EXERCISE EXTRAORDINARY DILIGENCE IN DETERMINING
AGENT’S LACK OF AUTHORITY.
++PRINCIPAL: Perla Mercado, the wife, owner of the subject properties
++AGENT/MORTGAGOR: Julian Mercado, the husband
++MORTGAGEE: Allied Banking Corporation
FACTS:
This involves the mortgage entered into by Julian
Mercado (the husband), based on the alleged SPA
executed in his favor by Perla Mercado (the wife) on May
28 1992, under the ff. circumstances:
a. On Dec 12 1996, Julian mortgaged with Allied
Banking Corp. (respondent bank) the subject
property covered by TCT No. RT-18206 (106338)
registered with the ROD-Quezon City to secure
a loan of P3M, and the additional loan of P5M.
(However, no such property is identified in the
SPA)
b. Rather, the SPA covers, among others, a
property covered by TCT No. RT-106338
registered with the ROD- Pasig.
Because Julian defaulted payment, respondent bank
foreclosed the REM.
This prompted heirs of deceased Perla (petitioner-heirs)
to file an action for the annulment of REM constituted
over the subject property on the ground that:
a. the same was not covered by the SPA, and
b. the said SPA, at the time the loan obligations
were contracted, no longer had force and effect
since it was previously revoked by Perla on Mar
10 1993, as evidenced by her Letter dated Jan
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23 1996, notifying ROD-Quezon City that any
attempt to mortgage or sell the subject property
must be with her full consent.
RESPONDENT BANK’S CONTENTION:
That the TCT No. RT-106388 registered with ROD-Pasig
[the property in SPA] was reconstituted as TCT RT-
18206(106338) registered with ROD-QC [the property in
REM]. Hence, the two are one and the same.
RTC nullified the REM, in favor of petitioner-heirs, for
Julian’s lack of authority by the terms of the SPA.
CA REVERSED, finding that Perla intended the subject
property to be included in the SPA she executed in favor
of Julian, and that her subsequent revocation of the
said SPA, not being contained in a public instrument,
cannot bind third persons.
Hence, the petition.
ISSUE:
a. WON Perla’s SPA covers the subject property in
REM. (NOT COVERED)
b. WON Perla’s subsequent revocation of the SPA
effectively removed Julian’s authority to
mortgage the property. (YES, SPA REVOKED.)
c. WON respondent bank is a mortgagee in good
faith. (NO)
d. WON the REM is null and void. (NOT NULL AND
VOID BUT UNENFORCEABLE, WITHOUT
PERLA’S RATIFICATION)
HELD: Perla’s SPA does not cover the subject property
in REM. Julian’s authority was subsequently revoked at
the time the loan obligation took place, and respondent
bank as mortgagee should have exercised extraordinary
diligence to know of such fact. Nonetheless, the REM is
not null and void but is unenforceable in the absence of
Perla’s ratification of the same.
A. PERLA’S SPA DOES NOT COVER THE
PROPERTY IN REM.
1. Julian was granted a special power of authority by
Perla…
Under Article 1878 of the Civil Code, a special power
of attorney is necessary in cases where real rights
over immovable property are created or conveyed. [12]
In the SPA executed by Perla in favor of Julian on 28
May 1992, the latter was conferred with the authority to
"sell, alienate, mortgage, lease and deal otherwise" the
different pieces of real and personal property registered
in Perla's name. The SPA likewise authorized Julian "[t]o
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exercise any or all acts of strict dominion or
ownership" over the identified properties, and rights and
interest therein.
There is no question therefore that Julian was vested
with the power to mortgage the pieces of property
identified in the SPA.
2. …however, the subject property was not included in
the SPA.
The SPA contained an exclusive enumeration of the
pieces of property over which Julian had authority.
Nowhere is it stated in the SPA that Julian's authority
extends to the subject property covered by TCT No.
RT – 18206 (106338) registered with the Registry of
Deeds of Quezon City. Consequently, the act of Julian
of constituting a mortgage over the subject property is
unenforceable for having been done without
authority.
3. The two properties are not one and the same.
Respondent bank claims that TCT No. RT-182206
(property in SPA) is merely a reconstitution of TCT No.
106338 (property in REM), and the property is actually
situated in QC, not Pasig. The failure of the instrument to
reflect the recent TCT Number or the exact designation of
the ROD should not defeat Perla’s clear intention.
(LACKS MERIT)
After an examination of the literal terms of the SPA, we
find that the subject property was not among those
enumerated therein. There was also nothing in the
language of the SPA from which we could deduce the
intention of Perla to include the subject property therein.
In cases where the terms of the contract are clear as to
leave no room for interpretation, resort to circumstantial
evidence to ascertain the true intent of the parties, is not
countenanced.
Also, a power of attorney must be strictly construed
and pursued. The instrument will be held to grant only
those powers which are specified therein, and the
agent may neither go beyond nor deviate from the
power of attorney. Where powers and duties are
specified and defined in an instrument, all such powers
and duties are limited and are confined to those which
are specified and defined, and all other powers and
duties are excluded. Thus, there must be “strict and
limited construction of the terms of a SPA”.
Thus, SC is not convince that the two properties are the
same. There was no supporting proofs to verify
respondent bank’s claim:
Bgn Digests
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a. It failed to present any certification from the ROD,
b. Respondent bank did not take the effort of
submitting and making part of the records of this
case copies of the two TCTs and closely
comparing them.
Hence, Julian was not conferred by Perla with the
authority to mortgage the subject property.
B. SPA WAS REVOKED.
Assuming arguendo that the subject property was indeed
included in the SPA executed by Perla in favor of Julian,
the said SPA was revoked by virtue of a public
instrument executed by Perla on 10 March 1993. The
revocation of the agency or SPA is expressed and by a
public document.
The Register of Deeds of Quezon City was even
notified that any attempt to mortgage or sell the
property covered by TCT No. [RT-18206] 106338
located at No. 21 Hillside Drive, Blue Ridge, Quezon City
must have the full consent documented in the form of
a special power of attorney duly authenticated at the
Philippine Consulate General, New York City, N.Y.,
U.S.A.
The non-annotation of the revocation of the Special
Power of Attorney on TCT No. RT-18206 is of no
consequence as far as the revocation's existence and
legal effect is concerned since actual notice is always
superior to constructive notice.
Besides, it developed that at the time the first loan
transaction with defendant Bank was effected on
December 12, 1996, there was on record at the Office
of the Register of Deeds of Quezon City that the
special power of attorney granted Julian, Sr. by Perla
had been revoked. That notice, works as constructive
notice to third parties of its being filed, effectively
rendering Julian, Sr. without authority to act for and in
behalf of Perla as of the date the revocation letter was
received by the Register of Deeds of Quezon City on
February 7, 1996.
Given that Perla revoked the SPA as early as 10 March
1993, and that she informed the Registry of Deeds of
Quezon City of such revocation in a letter dated 23
January 1996 and received by the latter on 7 February
1996, then third parties to the SPA are constructively
notified that the same had been revoked and Julian no
longer had any authority to mortgage the subject property.
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C. RESPONDENT BANK IS NOT A MORTGAGEE
IN GOOD FAITH
Respondent bank cannot now claim to be an innocent
mortgagee.
By principle, while it is true, x x x that a person
dealing with registered lands need not go beyond the
certificate of title, it is likewise a well-settled rule that
a purchaser or mortgagee cannot close his eyes to
facts which should put a reasonable man on his
guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of
the vendor or mortgagor.
ratification of the same, the real estate mortgages
constituted by Julian over the subject property cannot be
enforced by any action in court against Perla and/or her
successors in interest. Hence, unenforceable.
WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The
Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered by
the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision
dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch 220, in
Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with modification
that the real estate mortgages constituted over TCT No. RT – 18206 (106338) are not
null and void but UNENFORCEABLE. No costs.

This principle is applied more strenuously when the

mortgagee is a bank or a banking institution.

Considering that the property mortgaged by Julian was

not his, and there are additional doubts or suspicions as
to the real identity of the same, based on the:
a. Palpable difference between the TCT numbers
referred to in the REM and Julian’s SPA, and
b. The registration in the ROD which is of different
cities,
these should have put respondent bank on guard. IT
should have proceeded with its transactions with Julian
only with utmost caution. Thus, it failed to discharge the
degree of diligence required of it as a banking corporation.

As a banking institution, jurisprudence stringently

requires that respondent should take more precautions
than an ordinary prudent man should, to ascertain the
status and condition of the properties offered as
collateral and to verify the scope of the authority of
the agents dealing with these.

Had respondent acted with the required degree of

diligence, it could have acquired knowledge of the
letter dated 23 January 1996 sent by Perla to the
Registry of Deeds of Quezon City which recorded the
same.

D. REM IS NOT NULL & VOID BUT

UNENFORCEABLE.

Finally, the REM constituted over the subject property are

unenforceable and not null and void. Unenforceable
contracts are those which cannot be enforced by a
proper action in court, unless they are ratified, because
either they are entered into without or in excess of
authority or they do not comply with the statute of frauds
or both of the contracting parties do not possess the
required legal capacity. Thus, without Perla's
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A1878 – MACTAN-CEBU INTERNATIONAL AIRPORT

AUTHORITY VS UNCHUAN (SEEABOVETEXT)

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A1884 – BA FINANCE VS CA (1991)
R/T ART. 1884 – PRINCPAL’ S LIABILITY – BA Finance is bound by its
acceptance to carry put the agency, and is liable for damages which,
thorugh its non-performance, the Cuadys (the principal) may suffer.
++PRINCIPAL: CUADY SPOUSES
++BA FINANCE: as assignee of the rights
FACTS:
This involves a Ford Escort sedan obtained by Cuady
spouses (respondents) through credit from Supercars Inc.
This was evidenced by a promissory note, secured by a
chattel mortgage on the same vehicle.
Thereafter, Supercars assigned the PN & CM to BA
Finance Corp (petitioner). BA Finance obtained the
renewal of the insurance coverage over the vehicle with
Zenith Insurance Corp. Under the terms and conditions of
the said insurance coverage, any loss under the policy
shall be payable to BA Finance.
Problem is, the vehicle figured in an accident and was
badly damaged.
Cuady spouses asked BA Finance to consider the same
as a total loss and to claim from the insurer the face value
of the policy and apply the same to their remaining
account.
But BA Finance prevailed upon the former to just have the
car repaired.
Unfortunately, the car booged down. So, Cuady spouses
requested BA Finance to enforce the total loss provision
in the insurance coverage. But still BA Finance refused.
This prompted Cuady spouses to stop payment for the
PN.
Because of this, BA Finance sued the spouses for the
recovery of the balance. TC favored the spouses; CA
AFFIRMED.
ISSUE: WON BA Finance waived its right to collect the
unpaid balance of the Cuady spouses on the promissory
note for its failure to enforce the total loss provision. (YES,
BA FINANCE WAIVED, HENCE, RESPONSIBLE)
HELD: BA Finance had waived its right to collect the
unpaid balance.
BA Finance was deemed subrogated to the rights and
obligations of Supercars Inc. Consequently, BA Finance
is bound by the terms and conditions of the chattel
mortgage executed between Cuady spouses and
Supercars.
Bgn Digests
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Under the deed of chattel mortgage, BA Finance was
constituted “Attorney-in-fact” with full power and authority
to file, follow-up, prosecute, compromise or settle
insurance claims; to sign, execute and deliver the
corresponding papers, receipts and documents to the
Insurance Company as may be necessary to prove
the claim, and to collect from the latter the proceeds
of insurance to the extent of its interests, in the event
that the mortgaged car suffers any loss or damage.
In granting said powers, the Cuady spouses created in BA
Finance’s favor an agency.
Thus, under Article 1884 of the Civil Code of the
Philippines, B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for
damages which, through its non-performance, the
Cuadys, the principal in the case at bar, may suffer.
Since the Cuadys suffered pecuniary loss in the form of
salvage value of the motor vehicle, not to mention the
amount equivalent to the unpaid balance on the
promissory note, when B.A. Finance Corporation
steadfastly refused and refrained from proceeding
against the insurer for the payment of a clearly valid
insurance claim, and continued to ignore the yearning
of the Cuadys to enforce the total loss provision in the
insurance policy, despite the undeniable fact that Rea
Auto Center, the auto repair shop chosen by the insurer
itself to repair the aforementioned motor vehicle,
misrepaired and rendered it completely useless and
unserviceable.
PREMISES CONSIDERED, the instant petition is DENIED, and the decision appealed
from is AFFIRMED.
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A1897 – RUSTAN PULP & PAPER MILLS VS IAC

A1897 – SCHMID & OBERLY INC VS RJL MARTINEZ

FISHING CORP

A1897 – EUROTECH INDUSTRIAL TECHNOLOGIES VS

CUIZON (SEEABOVETEXT)

A1897 – DBP VS CA

A1898 – SAFIC ALCAN & CIE VS IMPERIAL VEGETABLE

OIL

A1898 – CERVANTES VS CA

A1900 – SIREDY ENTERPRISES VS CA

A1909 – TRAVEL WIDE ASSOCIATED SALES VS CA

A1909 – MBTC VS CA

A1919 – BUADO VS LAYAG

A1919 – ESTATE OF JULIANA DIEZ VDA DE GABRIEL VS

CIR

28